Werner Enterprises Inc (NASDAQ:WERN), which is in the transportation business, and is based in United States, received a lot of attention from a substantial price movement on the NasdaqGS over the last few months, increasing to $40.65 at one point, and dropping to the lows of $32.22. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Werner Enterprises’s current trading price of $33.35 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Werner Enterprises’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in Werner Enterprises?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Werner Enterprises’s ratio of 10.5x is trading slightly above its industry peers’ ratio of 10.34x, which means if you buy Werner Enterprises today, you’d be paying a relatively reasonable price for it. And if you believe that Werner Enterprises should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Werner Enterprises’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Werner Enterprises generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Though in the case of Werner Enterprises, it is expected to deliver a negative earnings growth of -17%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, WERN appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on WERN, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on WERN for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on WERN should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Werner Enterprises. You can find everything you need to know about Werner Enterprises in the latest infographic research report. If you are no longer interested in Werner Enterprises, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.